Penny Stock Trading – Secrets to Bigger Gains

Penny stock trading is a process of buying and selling shares of companies who do not participate at major stock market exchanges due to their size, financial situation or a myriad of other reasons. In addition, most of these penny stocks are averagely priced at amounts of less than one dollar. Penny stock companies advertise their stocks in Pink Sheets or so called Over the Counter (OTC) market niches.

You have probably heard a lot of penny stock fortunes success stories unveiling how some investors managed to reap unbelievable rewards and triple or even quadruple their penny investment portfolio. In reality, penny stock investing is perhaps the riskiest financial transaction you might get involved into due to a number of reasons, including extreme market volatility, lack of fully disclosed information on the penny stocks and high brokerage fees.

However, knowing some basic secrets of penny stock trading is sure to bring you some gains in the future once you get the hang of penny trading.

First and perhaps the most important secret is to choose your penny stock brokers wisely. Know your penny stock investing patterns and find stock brokers whose fees and commission rates are not going to eat up most of your penny stock yields. If your penny stock broker is charging extra for a trade of under a hundred stocks, make sure you are buying no less than a hundred penny stocks to avoid getting ripped off. In addition, deal only with reputable brokers for penny stock trading. Sadly, there are many scams and fraudulent penny stock brokers out there preying on novice and inexperienced investors every day.

Second, research your penny stock companies in and out. Get as much information as possible on them in order to make a fully informed decision. Check out a few online blogs or forums for penny investors. If you can’t seem to find a lot of information, could this company be hiding something? Stay away from penny stock companies that are being advertized on TV or in newspapers.

Third, do not get your entire investment portfolio tied up with penny stocks, trade no more than 10-15% to diversify your risks and limit your losses. Penny stock trading is extremely volatile and stock prices can drastically fluctuate over the course of just one day.

Last but not least on penny stock trading is knowing the right time to sell. You certainly can not learn this overnight but only over the course of penny stock trading experience.